Morning Notes – Wednesday August 7, 2019

Directional Bias For The Day:

  • S&P Futures are lower;
  • Double top formation on 30-minute chart; broke below the intermediate low of two highs; 61.8% extension target is near 2836.00 level
  • The odds are for a down day with elevated volatility – watch for break above 2870.50 for change of fortune
  • No key economic data due

Markets Around The World

    • Markets in the East closed mixed – Shanghai, Tokyo, Mumbai and Seoul closed down; Hong Kong, Sydney and Singapore closed up
    • European markets are higher
    • Currencies:
Up Down
  • USD/CHF
  • USD/CAD
  • Dollar index
  • EUR/USD
  • GBP/USD
  • USD/JPY
  • AUD/USD
  • NZD/USD
  • USD/INR
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Copper
    • Palladium
    • Crude Oil
    • Platinum
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 1.739%, up from August 5 close of 1.735%;
    • 30-years is at 2.269%, down from 2.295%
    • 2-years yield is at 1.597%, up from 1.577%
    • The 10-Year-&-2-Year spread is at 0.142, down from 0.158

Key Levels:

  • Critical support levels for S&P 500 are 2872.42, 2852.90 and 284742
  • Critical resistance levels for S&P 500 are 2884.40, 2898.07 and 2914.11
  • Key levels for eMini futures: break above 2875.75, the high of 8:00 AM and break below 2854.50, the low of 11:00 PM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future closed at 2881.50 and the index closed at 2881.18 – a spread of about -0.25 points; futures closed at 2876.00 for the day; the fair value is +5.50
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -15.00; Dow by -143 and NASDAQ by -33.75

Directional Bias Before Open

  • Weekly: Uptrend resumed
  • Daily: Uptrend Under Pressure
  • 120-Min:Down
  • 30-Min: Down-Side
  • 15-Min: Side
  • 6-Min: Up-Side

The trend and patterns on various time frames for S&P 500:

Monthly
  • Under Pressure
  • July formed a shooting star type doji at all time highs
    • Stochastic is forming a Bearish Divergence
    • RSI-9 is below a downtrend line from January 2018 high; forming a Bearish Divergence
  • June 2019 was a large green Piercing or Bullish Engulfing candle that closed near the open of previous week; May was large Bearish Engulfing candle that closed near the lows
  • Sequence of higher highs and higher lows since February 2016 is broken in December since then a new high has been made in May 2019
Weekly:
  • The week ending on August 2 was a large red bearish engulfing that closed below past five weeks’ close; small lower shadow and almost no upper shadow
    • Retracing from the upper bound of a broadening pattern
    • Stochastic (9,1, 3): %K crossed below %D from above 90; potential Bearish Divergence for %D
    • RSI (9) is turning down from 65; potential Bearish Divergence
    • The index bounced off the 89-week SMA during the week of June 7
  • Last week was up -93.81 or -3.1%; the 5-week ATR is 62.48,
  • Last week’s pivot point=2957.26, R1=3000.40, R2=3069.76; S1=2888.90, S2=2845.76; S1/S2/S3 pivot levels were breached
  • A down week; second in last five weeks and fourth in last ten weeks
  • Last swing low, 2728.81, was the low on June 3, 2018; previous all-time high of 2940.91 was breached during July 1 week
  • At/above 10-week EMA; above 39-week SMA and 89-week SMA
  • Uptrend Under Pressure
Daily
  • A large green candle that still formed a harami candle  with almost no upper shadow and a lower shadow that is one-third of the real body
    • %K crossing above %D; near 20
    • RSI-9 is turning up above 30
  • Below 20-day EMA, 50-day EMA and 100-DAY SMA; above 200-day SMA;
  • Uptrend Under Pressure
2-Hour (e-mini future)
    • Continuing the bounce up from a low of 2775.75 at 6:00 PM on Monday; up more than 100 points since; resuming the bounce after a brief pullback after the NUSE close on Tuesday
      • RSI-21 moving around 55
      • %K crossing below %D above 80
    • Above 20-bar EMA but below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Moving sideways to up since 5:00 AM on August 6
    • RSI-21 mostly above 50 since 3:30 AM on August 6
    • %K crossed below 80 at 5:30 AM
    • Above EMA10 of EMA50, which is above 20-bar EMA
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting up since 11:30 PM on August 5
  • The Bollinger Band was relatively narrow from 7:15 PM to 3:30 AM; expanding since with price first walking up the upper band and then dropping to the lower band by 8:00 AM
  • Stochastic (9, 1, 3): %K is below %D since 5:45 AM
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Tuesday, August 6 in volume higher volume. The indices gapped up at the open and then closed higher. The real body for most indices were large green candles that still made harami formation.

From Briefing.com:

U.S. stocks rebounded from their worst day of the year on Tuesday, as investors appeared comfortable in buying the dip after China took steps to stabilize its currency. The major indices closed near session highs with the S&P 500 advancing 1.3%.

The Dow Jones Industrial Average increased 1.2%, the Nasdaq Composite increased 1.4%, and the Russell 2000 increased 1.0%.

Tuesday’s gains weren’t enough to completely undue yesterday’s sell-off, but when contrasting the results versus the capitulation-like mood in the futures market last evening, today did seem like a good day. At one point last night, the S&P 500 was indicated for more than a 2% drop at the open after the Treasury Department labeled China a currency manipulator.

[…]

Nine of the 11 S&P 500 sectors finished higher by at least 1.0%. The information technology (+1.6%), financials (+1.5%), and industrials (+1.5%) sectors led the advance, while the energy sector (-0.1%) was the lone holdout as oil prices ($53.84/bbl, -$0.80, -1.5%) continued to decline.

[…]

While equities rallied, the U.S. Treasury yield curve continued to flatten, which reflected ongoing concerns about the economic outlook. The 2-yr yield increased three basis points to 1.61%, and the 10-yr yield finished flat at 1.74%. The U.S. Dollar Index increased 0.1% to 97.62.

Tuesday’s economic data was limited to the JOLTS — Job Openings report for June, which showed job openings increase to 7.348 million from a revised 7.268 million in May (from 7.323).

[…]